Friday, April 25, 2008

Can government be bound?

Anthony de Jasay has recently written an essay for Cato Unbound entitled ‘Government, bound or unbound?’ (see here). This essay is a sequel to a widely-quoted article he wrote twenty years ago entitled ‘Is limited government possible?’.

The essay discusses the important question of whether democracy (or, more precisely, representative government with majority rule) is compatible with the classical liberal ideal of a government that acts as a guarantor of liberty, using coercion only to enforce rules of just conduct.

In the first part the essay the author argues that constitutions cannot be sufficiently strong to restrain governments from doing what they are anxious to do or must do to preserve their tenure of power. The basic problem is that, notwithstanding the so-called separation of powers, the enforcement of constitutional rules that provide that government shall not do certain things lies ultimately in the hands of government. Judges are appointed by governments. I agree with this reasoning.

I also agree with most of the second part of the essay, in which the author discusses circumstances and events that may place limits on collective choice. He suggests that several factors may place contingent limits on government.

The need for political candidates to obtain donations from higher income donors in order to get elected. This constraint is obviously weakened where campaign funding is subsidized by government. Even without such subsidies, I doubt whether this is an important constraint in countries with strong union movements.

The desire of the winning coalition to remain in power limits the extent to which marginal supporters can be taxed and its desire to maximize long run tax yield prevents it from imposing high rates that would chase away “the goose that lays the golden eggs” (i.e. avoiding a brain drain and flight of capital).

When government expands beyond some point an increasing proportion of voters may perceive that continuation in this direction will result in a bleak future. This may result in the election of a reform government with a mandate to pursue market-friendly policies.

Finally, human motivation is influenced by factors other than identifiable interest. The author suggests: “Perhaps the purest and strongest limit on government is the standard, non-interest motive arising from superstition or taboo”. He gives the example of the balance budget as a standard that was followed reflexively for about a century and a half prior to Keynes’s General Theory.

I have two objections to the idea that we can rely on superstition or taboo to limit government. First, it is difficult to see how a taboo can be maintained in any area of public policy unless political leaders can explain why it exists and their explanations have fairly widespread support among relevant professionals. Second, as James Buchanan has suggested, the ethical constraints required to protect liberty are closely related to rules of reciprocity in interpersonal dealings (“Why I, too, am not a conservative”, 2005, pp 81-2). The rules of reciprocal respect extend beyond markets to include the political sector when people consider themselves to be engaged in politics to obtain publicly provided goods and services in exchange for tax payments (rather than to obtain distributional gains at the expense of others). The benefits of adherence to rules of reciprocal respect are obviously not beyond human understanding and adherence to such rules is likely to be enhanced by more widespread understanding of the purposes they serve.

The final comment I want to make about this excellent essay is that I think the author’s list of constraints on expansion of government omits one that has potential to be important. I think that transparency rules can be an important constraint on the expansion of government if voters understand their importance and expect governments to comply with them. I will write more about this in my next post

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